Apollo Hospitals seeks to prop up falling occupancy to boost growth

Apollo Hospitals Enterprise (AHEL) is focusing on increasing its occupancy to improve growth, which declined in the financial year (FY) 2016-17. The hospital has set the target of achieving 65 per cent occupancy by the end of the current FY from the 47 per cent occupancy at present, said senior management of the company.

AHEL had posted a 40.7 per cent fall in profit at Rs 48.16 crore in the fourth quarter of the FY17 as compared to Rs 81.31 crore for the same period of the previous FY on a standalone basis.

"The business plan this year is to see how we can improve our occupancy and fill in at least 400 more beds. We have a lot of vacant beds because of the new hospitals. First plan is to see how we can fill up the new beds and increase the occupancy from the current 47 per cent to around 65 per cent this year," said a senior official. Through aggressive expansion programmes, the company has crossed the capacity of over 10,000 beds in the last FY.

The company is targeting the growth of over 12 per cent during the current FY as against the nine per cent growth in the last FY. Q1 and Q2 of the FY are usually good for the company and it is expecting this to be true for this FY too.

During the year, for further traction in four specialities viz. Cardiac, Oncology, Neurosciences and Orthopaedics, it will also be focusing on Centres of Excellence (CoEs) in urban centres such as Chennai, Hyderabad. It is also looking at ways to increase the surgical volumes in specialities of urban centres.

The company expects to continue the similar pace of growth and margins in the pharmacy segment this year, which would add to the growth. To improve margins, it is also looking at increasing prices across various services this year.

AHEL Managing Director (MD) Suneeta Reddy said the company has witnessed good volume growth outside key clusters, especially in Bengaluru, Mysore and Vizag.

"We are confident that we are well placed to capitalise the rebound in the economy with new centres, new formats and stronger medical programmes. Multiple one-time developments that impacted FY17 performance are behind us," she said. "We are confident that outstation patients will return and we can drive back performance in both the mature and new facilities on the back of augmented medical teams and strengthened speciality mix."

The company said the demonetisation effect extended into this quarter as well, as outstation patients and patients from neighbouring countries found it difficult to access currency for their treatment requirements. The patient flows into Chennai branch took some time to recover fully after VIP admissions — like former Tamil Nadu Chief Minister J Jayalalithaa, which also impacted the quarter.

"The impact of the above incidents resulted in a revenue drop of Rs 15-20 Crs. The government regulation on stent pricing, which was with effect from February 14, 2017, also resulted in a revenue compression of Rs 8-10 Crores," said the company statement, adding, the Standalone EBITDA (Earnings before interest, tax, depreciation and amortisation) in Q4 was impacted by Rs 15-20 Crores due to the above-mentioned reasons. Navi Mumbai hospital saw its first full quarter operations in Q4FY17, which contributed to EBITDA loss of Rs 22 crore in the quarter.

The consolidated revenue in FY17 was at Rs 7,255 crore with a growth of 17 per cent, it added. The consolidated profit after tax (PAT) was at Rs 216 crore.